Accessibilty to Secondary Markets Part 1

As every trader, analyst and investors were glued to the senate hearings with the Goldman team, the grilling questions by its chairman and members of the committee has shown the desire for a stricter regulatory body for the financial industry. Investment banks like Goldman Sachs as big as they could be, has undoubtedly have access in secondary markets being market makers for every possible deals that could be thought of.

Accessibility to information, putting together some creative financial packages and knowing where to place them in the market place for investors aware of the risk / reward ratio will always be the underlying advantage for an institution the likes of Goldman Sachs. Being an investment bank, broker-dealer and a major market maker that has the reliable source of information to implement such deals will also experience having to take risk from their holdings or inventories from their books and be able to spread these risks from varies positions made in the open market.

The level of sophistication familiar with these financial instruments on how they work may be quite complicated that everyone may and may not be in the same page understood within the trading mechanism. Making it appear to some as otherwise. The regulatory rule for fiduciary responsibility for the clients and the market makers responsibility of disclosure of positions maybe a very hard question for the senate panel to really understand. The line of questioning would sometimes be leading towards finding misrepresentations from the Goldman team regarding disclosure of other counter party involve in such a deal.

These has a direct correlation as to how the Foreign Exchange market works based on the contributory institutions and banks as reflected in the price action seen on the computer screen. Meaning that in the earlier trading days, institutions and other major banks participating on live FX dealing are shown as to price contributors on both bid/ offer. However, as some of the other trading platforms only shows the price quoted on both sides but not the institution participating in the market. The interbank traders with Thomson-Reuters dealing system knows who are actively trading in the market place.

Transparency on trading , counter-parties involved through broker dealers may sometimes be filtered out since broker dealers are not required to disclose their own portfolio's position, but rather may state that they may or may not have positions in behalf of their own clients. To define a clearer view of proprietary trading is what the regulatory commission would like to achieve at this time to avoid the next financial crisis.

Secondary markets for most trading institutions are carried out for the sake of spreading and managing risk in any asset based financial instrument. The Forex market is no different as the principles of trading has its own definitions to follow. Although, similar approach are made only for those traders, investors and portfolio managers who happens to be a little more sophisticated than others. The information is in the open market. Doing due diligence is just what it takes to have the right source of information, orientation and coming from reliable institutions involve in the industry.

AUD, USDJPY & AUDJPY trend outlook

Interesting enough, where would the next probable market trade might be coming from? That is one of the key elements that we normally try and speculate on. Not that there is not enough volatility in the market place. But the fact still remains that the upcoming senate hearing on Goldman Sachs will obviously be covered by the news overwhelmingly and may also have some indirect effect to the market USD movements indirectly. The Greece situation will also be hoovering on the clouds directly affecting the Euro the next few weeks and the British Pound managing to benefit out of the situation managing to move higher on a slower pace.
Although, with the stock markets higher opening and encouraging trend higher as most of the earnings report from major companies have shown critical growth as stock market prices have moved higher providing some support from a slightly weaker USD from the previous week closing lower for the week ending April 23, 2010

Actually, the lower closing was a breather for the USD as it has been maintaining its levels above the 80. - 81.00 bp levels which happens to be still within its directional trend higher. While Gold prices also have sustained above the $1135.00 levels. This is where commodity prices on the precious metal have been in tandem with the direction of the USD since the sart of the 1st quarter of the year on a bigger perspective.

Meanwhile, looking at the extra ordinary price movement of the AUDUSD back to the 0.9300 and re-testing the 0.9320-80 price range may well be breaking on the next attempt higher with the support from the AUDJPY that would be making significant new highs before the closing of the month of April. This has been led primarily from the USDJPY rally that we have seen where the USDJPY is currently working at 94.24; as we have speculated on based from our video presentation on the USDJPY vs. AUDUSD Directional Trend dated April 05, 2010. A link to this video is attached herewith : http://www.youtube.com/watch?v=CWW9ctnR5ts

The direction of both majors were anticipated at an earlier phase but the corrective move on the AUDUSD back down to the 0.9155 in the Asian session was the low where the pivotal point on a price reversal back to its trend was established after passing through the resistance levels of 0.9220 and closing above said price for the week ending 23rd of April.

While the USDJPY held its prices and moved higher currently working at the 94.24 area which was the initial target objective of the USDJPY after the 91.58 low and as to now it is at the higher price resistance. the fundamental reports on the Japanese Yen's more likely scenario that it would continue to weaken is the outstanding 200% debt ratio vs. its GDP, its political uncertainty of handling this ratio by the Japanese government and without mentioning Japan's economic recovery while their workforce and population has also been declining will have a harder time to make it move faster. Now this would leave some room for rating agencies to downgrade Japan through the course of the year making the USDJPY to move higher from hereunto. the same scenario as a ladder-like manner for the USDJPY to move higher mid-term to longer term perspective. Couple with the AUDJPY to do the same. For as long as the Aussie would hold its levels then this case scenario will be one of the major market trades that we would expect in the near term. As already evidenced showing some probable high in the making.

There are major up and down swings that may not be as tolerated for small retail accounts which may trigger unexpectedly some stop loss orders. Tolerance levels should be carefully studied and understood as the market makes its way with more wider trading ranges and market swings within the three time zones.

Be extra careful of these price movements as major players may consider this case scenario in the mid-term. We just wanted to place this notice that it can happen along the way. some may agree or disagree with the analysis. But let it be known that this opinions and market views of the FX market is simply for informational purposes and education. There will always be the risk of loss trading the FX market so consider whether it is suitable for you or not. Consult your financial advisor.

Resource : Bloomberg News, Associated Press, Google finance, Japan Economic Trade Report

Good Luck and Best to your trades.

Holding back the crisis - recovery stays!

What a difference a day makes! So to speak, the wild fluctuations from all sides have made the foreign exchange market to move from the opening prices on the Asian sessions, the USD correction from last week, Goldman Sachs troubles with the SEC, leading indicators good numbers, investors confidence for the Euro and the Pounds reactions on inflation. This short summary of reports have made a lot of difference in a single days trading.

Again, a clear example is the Aussie dollar opening prices in Asia from a low of 0.9155 and currently working a t0.9315, the AUDJPY low price of 83.92 and currently working at 86.65. Although, the activities have been more in line with the major players shifting positions from the other major pairs, the rest of the European currencies were not as active and remained within the weeks trading range. With the EURUSD still at 1.3486 and the GBPUSD at 1.5317 ; a slight technical recovery to fill in a day to day opening gap from a low of1.5190 for this early weeks trading.

These wider trading range has been more fundamentally oriented with so much unexpected market movements thhis 1st week of the 2nd trading quarter. Although, the limelight of Goldman's troubles will still be prevailing in the market news as the Obama administration would not allow a disruption of the economic recovery at all cost. Nonetheless, an institutional firms as big as Goldman Sachs has showed a detrimental effect on the market let alone as the SEC tries to redeem itself and its reputation from the previous crisis. We would not discount the possiblity of a back door negotiations from hereunto but will be at a very discreet level.

There will be no additional disruptions to the US economic recovery, not that the governments long standing claim that it would do everything to come out of this crisis more than ever. With the SEC divided as to pursuing its case with Goldman; already shows the after-thought of some democrats and SEC officials withholding their decisions to this point. But some other companies such as AIG would pursue such claims.

For now to be able to trade the market with such conditions would be difficult as so many factors are involved. And for the time being allow the market to move to its own direction while increase in risk appetite has slowly grown higher with these news.

AUDUSD & FX Majors lost Steam !

The prominent Aussie Dollar lost steam as it retrieves its lows approaching the vital prices support of 0.9170. Currently, working in the Asian session at the 0.9185 levels may see some more loses along the trading sessions when it opens in the European and American markets.

The series of high price points of 0.9320-80 range would have set it as the initial major resistance for the Aussie at this time which now could be determined as price high for the previous 5 weeks of trading. this goes the same way with the NZUSD at the current price level of 0.7080 resting on top of its trend line which it may also attempt to penetrate to the price levels of 0.7050-60 which is within striking distance of the trading range for the week.
The shift of US Dollar funds from financial stocks has led investors to swiftly changed sentiments to a safer haven denominated investment. The market situation basically has been disturbed by the report of the SEC accusing Goldman Sachs of fraud. Which obviously spilled over on some other financial institutions as well as hedge funds moving lower. It may not be as a direct effect but the market negative outlook may have indirectly lent some support for the USD corrective mode from the previous week. As did in the commodities market's movement for Gold and other precious metal including the oil prices.

Relatively, the market in the European market discounting the Greece bailout's and other economic report have led the EURUSD and the GBPUSD to continue to move lower with the EURUSD at 1.3462 attempting to go back to the previous low of 1.3280. Having completely filled in the previous opening gap which we also stated is now in the position to continue its mid-term downtrend. Meanwhile, the GBPUSD looks a litle more steadier to lower parameters working at 1.5250.

Technically, both currency pairs shows no direct reactions to move higher for the moment as market participants are waiting eagerly for additional reports on the current Goldman situation and the Obama's administration continued reaction in handling similar cause and effects to the market.

The USDJPY and USDCHF is poised to react the same old story of contradicting movements with the USDCHF more inclined to move with the USDX higher and the USDJPY to do otherwise. This can hold true on a day to day basis while others maintain their stance for the European majors like the Euro to move lower than the Pound would.

The cross rates have been also in line with the general direction of the market to move lower as no real volume build up on the financial futures and open interest have shown no keen interest for the time being. Risk appetite and risk aversion on the currency pairs have steadily been lower from the opening 2nd quarter of the year.

We shall maintain a steadier to neutral stance while we also await some more developing outlook both on a technical and fundamental stand point. Not that we are uncertain but we'd rather be able to keep more on what we have made from the previous market trades that has been favorable for the USD directional upward move from the 1st quarter of the year.

Good Luck and Happy trading!

Goldman Sachs Issue on Risk disclosure!

It was a whirlwind issue when the news on the SEC charging Goldman Sachs with fraud involving a high ranking executive with regards to CDOs and the even mentioning Paulson's Hedge fund company in the process. The bottom line on risk disclosure was the main element of the case as investors were not informed of the counter party's of such investments when offered during the period. In essence, every possible deal involving in the stocks , derivatives offerings were all angles should be properly disclosed. In Paulson's case; he simply found and perceived the failure of the financial system that led him to short the market through the Credit defaults market where there are not a lot of regular retail investors would have access to.

To make this issue as simple as possible, trading investments that involves buying and selling financial instruments as always shows both sides of the coin. For every buyer there should always be a corresponding seller. Market makers who make these all possible are institutional banks, other highly sophisticated companies as well as hedge fund managers, traders, private investors and other speculative investors who take the risk and manage to come up with strategies and money management / allocations to spread and hedge investment portfolio in both sides of the market. Conditions and market sentiments overwhelmingly prevail in such cases where one may and may not perceive what the outcome may be or when it can take place.

these common scenarios take place in almost all markets whether they be in stocks, foreign exchange market, commodities, derivatives and other financial instruments for that matter.

In " Offsetting Transactions " as most strategist, investors and sophisticated traders do manage to place such trading styles as to simply minimize the risk of loss on the investments over a period of time. However, such strategies done in line with the time frames should always be flexible that gears towards market conditions and could be changed from time to time as the market goes along influenced by other market fundamentals.

Also in the case of the Foreign Exchange trading, managing risk similar to these " offsetting Transactions can be utilized and implemented based on the level and degree of knowledge and sophistication a strategist or trader can apply based solely on their main financial objectives.

There are several ways of trading the Forex market from Spot/Cash market, USD/Foreign base currency trading, financial futures, options, derivatives, forwards and swaps just to name a few. But how to properly manage a few combination would simply be involving a pretty huge sum of money to implement such strategies. And the probability/ ratio of winning against losses are calculated based on given facts and assumptions.

For all intents and purposes; these information's are actually available but needs a lot more due diligence, research and information gathering from reliable sources. The strategies could be made and similar applications can also be fashioned the same way to offset, minimize and try to equalize the risk of loss through proper hedging; not simply on a buy and sell trades in the FX market. But by utilizing all possible markets accessible to the investors.

However, for retail and smaller types of investments it would be very difficult to maintain many positions. So using the leverage as a means of spreading the risk is vital for the trade. Since the level of playing fields presented by some broker-dealers are limited and leaves the investors on a simple trade of buying and selling their favorite currency or commodity in the market.

Goldman Sachs, as big as they are and other financial institutions do have a variety of options or other services at their disposal depending on the criteria and needs of its clients. So if Paulson's company didn't come up with that idea and trading plan of shorting the market through credit defaults then this would not have happened. Perception as to how the financial markets will eventually end up is simply making the choice whether its going up or it going down.

So please make your choices right. It can only help to do due diligence research on any investments!

Good Luck and Happy trading!

Majors at pace with the USD

In our Market View report dated the April 12 calling a corrective mode for the USD or the US dollar index to move towards the 79.20 - 80.00 important support came true to our expectations and that the correction would occur starting the 7th of April towards the second week of April. Supported by the widening trade gap report which led the USDX to open lower at the 80.55 basis point close enough to the 1st support price.

The opening Asian prices that opened with a gap for most majors like the EURUSD and the GBPUSD has corrected and filled in that gap from the previous days trading range in keeping pace with the US dollar's correction. Opening at 1.3625 from the closing of 1.3495 for the EURUSD and 1.5445 opening for the GBPUSD from a 1.5375 closing respectively. Currently, its back to the previous prices of Monday's opening at 1.3640 EURUSD and 1.5508 GBPUSD after the correction. Although, the EURUSD is still lagging behind filling in the gap a second attempt should not be discounted as risk appetite may run out for the Euro and simply move lower.

The significant indicator showing this was mainly reflected with the AUDUSD from 0.9360 down to it correction low of 0.9220 ; a 0.0140 range and is currently back to the 0.9340. the price and area index adjustments has been made and the probability to continue upwards where it left off last week.

In summary, the correction for the European majors and the USDX are in line and for the GBPUSD may try to take a lead role other than the Euro for the time being with a target objective of 1.5580 which happens to be in striking distance. But what is more critical is to follow the USDX which may attempt to go lower than our initial support of 79.20- 80.00. Whenever this hold true again, we are looking a t the 78.50 mid-range basis points as the next Fibonacci retracement levels.

With the next reports looking more favorable for another USD rally; but the momentum may not hold or sustain these levels if and when there would not have enough volumes to back it up. this will then tend to move the USD lower beyond the target support. And these next two days will prove this analysis right or wrong.

Good Luck and Happy trading!

Trade with Confidence!

Trading the Foreign Exchange market is not as easy as some would claim, may they be professional traders, investors and even money managers of every level and sophistication. Having a better understanding of this market would take years to achieve as it is influenced by so many fundamental and technical factors. Specially for those who have incorporated electronic trading and algorithm formulas into their trading systems.

What makes trading the markets more challenging and interesting is the fact that the challenge of winning and loosing in the market is what makes most serious traders and investors tic, so to speak. The feeling of winning and making money is more often the real reason why people continue to trade despite of loosing more thereafter. And when they do lose it is the stubbornness of making back what was lost and keeping it.

How much one has kept after all the trades can only be called a real winner. It is not the total number of trades done on both sides of a winning trade and a loosing one. As long as the overall net gain has been saved and made use for other investments can only be called a successful investor.

The number of countless trading robots, expert advisor, trading software out there could not even be counted upon as newer ones will always come out to claim that their systems are the best and delivers the bottom line trades. These systems may hold true to their words only at a given period of time, but may not be able to hold true in the long run. As some may have forgotten the best formulas ever written and used by Long Term Capital has failed them leading to one of the worst trading cases in history.

Again, trading can only best suit each individual investor depending on the outlook by which one is satisfied with their investments. Knowing when to trade, not to trade, stop any lose and simply take a profitable trade is one of the basic elements as everyone who reads this blog would say. . . " tell me something I don't already know. "

Money management has all its principles and practises that needs to be followed. Trading the Foreign Exchange market has a few lessons of its own.

Namely:

1. Allocate an appropriate amount of funds which would be invested from your overall portfolio.

2. Having the right orientation of the market, the intricacies of trading FX from reliable sources and proper due diligence can only help make a sound decision.

3. Be independently aware of market conditions, choice of currencies to trade including their correlation ship, trading range, point value /amount of exposure, time table within a trade plan.

4. A trade plan that consist of entry /exit levels, risk tolerance price / point willing to take, alternative strategies available even before entry, profit potential and stop loss of any trades.

5. Opportunities will always be present in the market. what is equally important is to wait for potential trends that may provide a well worth investment contrary to the risk involved. there are 4 quarters in a year, 3 months in a quarter and 4-5 weeks in a month. Choose and determine your trades and discipline.

6. Percentage trading will always provide a better way of trading any market. Having a net gain from an arbitrary hedge strategy to manage risk and absorb wild fluctuations and increased volatility will help maintain, sustain and protect from unexpected fundamental reports or news that may influence the market on its own.

7. Learn to keep what you have made and wait for the next trading opportunity!

8. Take control of your own trades! It is not in the trading platform, software or the broker-dealers that offer FX dealing services that makes you win or lose. As spreads makes every broker-dealer, counter-party earn their revenue from other than making certain that every position done are equally matched, rolled over, swap and netted out on every closing session to avoid further risk in the market.

9. Learn to trade how interbank trading does their trades through different strategies available. Although, retail FX trading has its own limitations that can only be found by trading with the interbank market. However, not everyone may be qualified to do so.

10. Due diligence, Research and constant studies are necessary while making trading decisions. And never be influenced with other brokers opinions and market outlook as many have failed and many were right at times. Any decisions made should always be your own!

Asian Opening Session

As the Asian sessions opened with a soft touch on the US Dollar; due to the fact that the European Community's support through the International Monetary fund to assist Greece with a USD30B lifeline totality,

UK's more concerned on inflation issues but more importantly as we have been within the range of calling the corrective mode of the USDX as the US Stock market have seen the 11K DJIA index and most investors have been shifting positions from the USD. With this clear situation, volumes and open interest will build up for a continued rally for the weeks ahead. As long as the volumes would sustain its levels these will play a heavier toll as the EURUSD and the GBPUSD would be heading higher.

The leading commodities led by the precious metals would be the headliners as the continued directional movement touching and going beyond our expected target price of $1150.00/ oz. to US1164.80 high added to the bearish tone for the USDX as it closed at the 80.88 bp and may try to attempt a lower price below 80.00 which may be attainable if the volumes on the Stocks would increase in a dramatic fashion.

The AUDUSD opening with a gap on an intra-day basis at 0.9360 would only retrieve lower to fill in the gap. This would also hold true for the rest of the majors like the EURUSD and the GBPUSD. However, just be cautious as the higher openings would also have the tendency to close lower to make it appear as the price wise in a directional trend lower until the sellers would turn to buy in or simply to settle their previous positions specially for those who would have sold at the 1.5275 levels for the GBPUSD and the 1.3380 shorts for the EURUSD expecting the prices to continue heading lower. Expect some market capitulations to happen as prices would force earlier sellers to throw in the towel for having a small tolerance point and will price fluctuations would swing wider triggering some stop loss for retail speculative investors.

Good Luck and best to your trades!

Indecisive Market or Trader's reluctance to trade

With the market being quiet and waiting for the FOMC meeting, the delayed Fed report on currencies, China's Hu Jintao visit to the United States, the labor data for the week has led market participants to be indecisive of what to do in spite of the closing numbers last week for an economic recovery. And most especially the closing dollar's significant higher close for the 1st quarter of the year.

As we have recalled the mix sentiments of reports but still maintaining our stance of a higher closing has led the USDJPY take the lead for the currencies. Although, the Loonie or the Canadian dollar close to parity prices have been in the limelight for the beginning of the weeks and the first trading of the 2nd quarter.

To choose which of the major pairs and cross rates to trade has been the next 60K USD question mark. But it is very obvious that the market traders were waiting for a spillover of last week's numbers on the currency market. However, the stocks and the Bond market and the commodities market led by copper has been taking the lead over the recent trading sessions. The precious metals will lead the commodities market for the time being. Gold prices may attempt to lead the next high as the USD may take a shorter breather by the middle of the week and the succeeding week thereafter. Which is in part of the correction that we have anticipated due to the cyclical pattern we have mentioned last December. In one of our articles written that the correction on the USDX will begin on the 7th of April 2010. If and whenever this hold true other than the reports due this week may eventually support that outlook.

From our last market view dated the 23rd of March the USDJPY would lead the way upwards from our current long position of 92.69 on March 29 Monday before the closing of the month. As of this writing the USDJPY is working at 94.39 from a high of 94.58 initial resistance levels. And the CHFJPY topping at the 89.97 and currently at 88.83 has been a huge profit potential from our previous position at 85.28 last March 23.

These positions and summary of trades has been presented and supported in our FX video attached on our market view analysis since February 25. However, there is still no guarantee that the same results would occur in the near future as prices fluctuate in extreme conditions.

For now, the Aussie and the Canadian Dollar may slowly gain ground with the expected correction on the USDX this coming weeks ahead. Although, some would disagree with our views as they are still expecting the rise on the USDJPY after a correction downwards. But by that time we would be settling our current position and would only looking at the next trading profit potential.

Good Luck and best to your trades for the weeks ahead!